Earning $2 Million A Year Running A Single-Family Office

Russ Alan Prince
, ContributorI write about the creation and management of exceptional wealth.Opinions expressed by Forbes Contributors are their own.

Single-family offices are wealth management and lifestyle boutiques in the service of one very wealthy individual or family. Based on a 2017 survey of 185 senior executives, reflecting compensation earned the year ending 2016, those executives with a piece of the action earned, on average, slightly more then $2 million.

These single-family office executives represented about two-fifth of those surveyed. They have a financial stake in the success of the single-family office, select investments, or both. According to Usha Bhate, executive director Institutional Investor, “These family office executives can hit big, but they can also not hit at all. In 2016, the compensation range for them went from $55,000 to $8.6 million. They are working under a performance based model and if they fail to perform they have few, if any, financial guarantees.”

The majority of single-family office executives are paid a base salary and a discretionary bonus. For them total remuneration tends to run around $300,000 to $400,000. While the upside is limited, earnings are more consistent. In effect, it is a well paying job.

In contrast, having a “piece of the action” can be exceedingly profitable. Senior executives with some form of participation arrangement have earned – in a single year – tens of millions of dollars and, in a few noted instances, considerably more.

“It is evident that where the ultra-wealthy is looking to grow their fortunes, they are more inclined give the executives the opportunity to share in the upside,” says Angelo Robles, founder and CEO of the Family Office Association. “Setting up these types of compensation arrangements is very much a negotiation between all involved. While there is no real template to follow, there are guidelines. One of the most important considerations is developing the arrangement taking into account risk-adjusted returns.”

“Looking over all the compensation research we’ve done for more than a decade, it’s very likely that talented single-family office executives that can deliver will be earning more and more money going forwards,” says Bhate. “For highly motivated, capable professionals, running a single-family office is increasingly becoming a way to build their own personal fortunes.”